The one-year sentence handed a Medicine Hat man for his role in a mortgage investment scheme that cost Alberta investors millions of dollars is a “miscarriage of justice,” says one of the victims.

Jon Edmunds, who lost $100,000 buying securities in The Investment Exchange Mortgage Corp. or TIE Mortgage, said the penalty handed Douglas Wayne Schneider is especially aggravating considering that investors spent thousands of dollars to hire a private investigator to track him down in the United States, resulting in his capture and extradition to Canada.

“There are grandpas and grandmas out there. There are elderly people on fixed pensions. They have no recourse,” said Edmunds, a 62-year-old accountant, pointing out that one 75-year-old victim has had to take a part-time job at Walmart to supplement his income. “Schneider is relatively young. He’s able to recover.

“There’s nothing (in the decision) about a fine, nothing about financial restitution, even though this man was paid — and he acknowledged it — in excess of $1 million in commissions. There are times when the system fails the people it is supposed to provide a safety net for.”

Charges of fraud levelled by the Alberta Securities Commission in January 2014 were dropped at provincial court and Schneider pleaded guilty to trading in securities without registration, illegal distribution of securities and making misleading or untrue statements to investors.

Provincial court Judge Mark Tyndale said it was aggravating that the offences took place over a number of years involving a large number of victims.

He said the crimes occurred between Jan. 24, 2008, and Jan. 1, 2013, and Schneider was responsible for 45 of 142 victims and $1.6 million of the total loss of $12.5 million. About $27 million had been invested by 200 people since TIE Mortgage began in 2002.

“This was an egregious breach of trust,” said Tyndale. “He was a salesman but many investors/victims were friends of his neighbours and family. He sat down at the table with them, because they trusted him. They gave him their money. Many elderly people had their lifesavings ripped off in what was a Ponzi scheme. The 12 victim impact statements submitted each talk about the devastation to their lives.”

However, the judge said Schneider wasn’t the controlling mind, and his criminal intent was one of wilful blindness.

“He also lost $600,000 of his own money so, in some way, he was a victim as well,” the judge added. “He also spent 96 days in custody in a hell-hole jail in Santa Ana, Calif., where it was dirty and dangerous. He didn’t suffer harm, but frequently slept on the floor in fear for his life.”

Tyndale said Schneider had been sanctioned in 2005 by the ASC and banned for four years from having anything to do with securities so, for the first 13 months of these offences, he was also violating a distribution ban.

The judge accepted a joint submission by defence lawyer Alain Hepner and ASC prosecutor Garner Groome for one year in jail, then gave the offender credit for the guilty plea and enhanced credit for time in custody, bringing time to serve down to 60 days. He recommended that Schneider serve his intermittent time at the Medicine Hat Remand Centre.

Court heard that co-accused Kenneth Charles Fowler, president of TIE Mortgage, has allegedly absconded to either Belize or Costa Rica which do not have extradition treaties with Canada. He was believed responsible for the other 97 victims and about $11 million.

Edmunds said the victims, who are continuing to pursue a civil lawsuit to recover some of their money, each contributed $5,000 to build a $250,000 fund to track down Schneider and Fowler and pursue other remedies.

He said the private investigator they hired found Schneider and sent a picture of him dining at a restaurant to prove it. He was using his own name, driving a luxury car and living in a nice house, the PI reported.

“So I called the ASC and said, ‘We got him! He’s here,’” said Edmunds. “We had his home address and everything. And they did whatever it is they did and L.A police picked him up.”

Meanwhile, the detective tracked Fowler to the Palm Springs area of California and was a few days behind him at one point. But the investors called off the hunt because it was becoming too expensive, Edmunds said.

ASC spokesman Mark Dickey said the last time the ASC forced someone back to Canada to face charges was in 2005 when Sheldon Zelitt was extradited from the Czech Republic. He was convicted in the VisuaLabs Inc. case, where investors were duped into investing in a nonexistent 3-D TV product.

“Regarding Mr. Fowler, we will be maintaining the Canada-wide warrant for his arrest,” said Dickey. “In combination with our agreements with various U.S. agencies, if he surfaces in either country, he will be arrested.”

In November 2012, the ASC issued a cease trade order against TIE Mortgage, noting the company had failed to meet filing requirements under Alberta securities law.

Grant Thornton Ltd., appointed receiver of TIE Mortgage and Fowler by the Court of Queen’s Bench in 2013, seized assets including a house, a Porche and jewelry and sold them, resulting in a small recovery of about $250,000 for investors.

Fowler allegedly represented his company as a qualified mortgage investment corporation and made assurances that investments with the company met the requirements for RSPs and other tax-deferred investments.

However, Grant Thornton reported it had found no evidence that any mortgages or loans had ever been made to third parties — the only mortgages held on the company’s financial statements up to 2012 appeared to be inter-company or shareholder loans that were not repaid.

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